As a seasoned analyst with over two decades of experience in financial markets, I have learned to navigate the complexities of economic cycles and global events. The recent surge in Bitcoin (BTC) has piqued my interest, but I remain cautiously optimistic about its potential to breach the $70,000 mark.
As a crypto investor, I’ve noticed a 3.8% surge in Bitcoin (BTC) from Oct. 23 to Oct. 25, but it seems to have hit a roadblock at $68,700. The question is, does the current bullish momentum hold enough power to propel the price into the $70,000 range? Although the Federal Reserve’s recent rate cuts have ignited investor risk appetite, breaking through the $70,000 barrier appears to depend on four key factors.
Key constraints involve the volatile state of the global economy, worries about excessive mining supply and insufficient profits from hashrate, the possible impact of U.S. election results on regulations, as well as substantial amounts of Bitcoin held in exchanges.
Investors are showing caution due to global economic instability. Although Bitcoin has climbed into the top 10 most valuable assets worldwide by market cap, sharing the list with big names such as TSMC, Berkshire Hathaway, Tesla, and Walmart, there’s still a good reason for investors not to go “all in.” The returns from traditional assets are consistent, and fixed income yields approximately 4.7%, keeping the urge to switch to Bitcoin relatively low. As a consequence, investors might be holding off on making a move towards a $70,000 price target, preferring to wait for further market indications before committing.
To further the ongoing discussion, let’s consider the approaching US presidential election. Vice President Kamala Harris, who is among the frontrunners, has expressed a lean towards a tightly controlled market, with an emphasis on safeguarding individual investors. This position differs from former President Donald Trump’s perspective, which advocated for the integration of digital assets into conventional finance. Such views might impact Bitcoin’s path to acceptance.
Bitcoin miner sell pressure and onchain activity
Worries about Bitcoin’s stability are partly due to its mining industry, where profitability is being challenged by unfavorable conditions. The hashrate index, a gauge of mining revenue potential, has plunged close to record lows at around $49 per petahash per second (PH/s) daily, representing about a 50% decrease since the halving in April. This drop suggests that miners, who play a crucial role in maintaining network security, are under significant financial strain. As they adapt their operations to cope with these pressures, their actions could potentially influence Bitcoin’s market trends.
Since approximately 1.8 million Bitcoins, valued at around $122.4 billion, are in the possession of miners collectively, there is a concern among traders that they may be compelled to sell aggressively, potentially impacting the market.
During a recent interview with Bloomberg, Ethan Vera, COO at Luxor Technology, said,
Their ongoing losses will remain negative, and they’re masking the current struggling state of the industry and their own inefficient operations by issuing more shares, thereby diluting the ownership of existing shareholders.
Over the past six months, the data recorded on the blockchain related to Bitcoin has not provided much comfort. The average number of daily active addresses for Bitcoin has generally remained unchanged during this period, hinting at a similar slow pace in adoption observed by static search volumes for Bitcoin on Google, which indicates minimal expansion in public curiosity.
Spot Bitcoin ETF accumulation and exchange deposits
Certain analysts predict a possible “supply disruption” due to increased Bitcoin holdings in exchange-traded funds (ETFs). Yet, this perspective may not fully consider the significant amount of Bitcoin stored on exchanges, which currently remains high. Estimates for these deposits vary from 1.9 million to 3 million Bitcoins, depending on the activity at firms like Coinbase related to custody.
Regardless of $2 billion being added to spot Bitcoin ETFs every month, there’s a minimum of $129.2 billion left in exchange reserves. Determining the precise price that would prompt widespread selling is difficult. Nevertheless, it’s possible that more Bitcoin could enter exchanges and some ETF investors might decide to sell their holdings once they achieve substantial profits.
To feel secure enough to increase their Bitcoin holdings and push the price over $70,000, traders will likely need a mix of conditions such as lower interest rates, enhanced mining profitability, and substantial growth in ETF investments.
This piece is meant to provide general knowledge rather than serve as legal or financial guidance. Please note that the perspectives, ideas, and opinions expressed within are those of the author and may not align with or represent the views and beliefs of CryptoMoon.
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2024-10-25 23:34